Mortgage News Daily recently reported that four members of the Senate Banking, Housing and Urban Affairs Committee have introduced legislation that would control how the increase in guarantee fees levied by Fannie Mae and Freddie Mac are used and when the stock in the two companies can be approved for sale.

The Jumpstart GSE Reform Act — which was introduced by two Republicans (Bob Corker of Tennessee and David Vitter of Louisiana) and two Democrats (Mark Warner of Virginia and Elizabeth Warren of Massachusetts) — would prohibit any increase in the guarantee fees (or “g-fees”) from being used to offset other government spending and the sale of Fannie Mae and Freddie Mac stock by the Treasury Department without Congressional approval.

The Federal Housing Finance Agency’s strategic plan was to slowly raise the g-fees which Fannie and Freddie are required to charge, with the goal of returning private money to the mortgage market. The temporary payroll tax extension that was signed into law in December 2011 was paid for in part by the g-fee increases.

Senator Corker said that Treasury would need approval from Congress and the president to sell its investment in the two GSEs because Congress still needs to work on housing reform. If the stocks were sold off first with Congress’ say-so, Senator Corker said, private stockholders would benefit while the taxpayers would get stuck with the bill.

Guarantee fees are fees charged by mortgage-backed securities (MBS) providers (such as Fannie and Freddie) to lenders for bundling, servicing, selling and reporting MBS to investors. The purpose of the g-fees is to protect against credit-related losses in the mortgage portfolio.